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Two major South Korean financial groups have pledged a combined 2 trillion won (approximately $1.4 billion) to expand lending for low-income households and financially vulnerable people, as the country steps up efforts to curb illegal private lending.
Hana Bank to fund microloans and launch new worker loans
Hana Bank will contribute 100 billion won to the Korea Inclusive Finance Agency to expand funding for Hana Microfinance Foundation, a nonprofit that provides loans to people who have limited access to conventional banking.
The funding will support small-business startups, business operations, facility improvements and emergency living expenses, with the goal of helping financially vulnerable borrowers achieve greater economic independence. The contribution is part of Hana Financial Group’s fifth major initiative to transform its approach to inclusive finance, announced in May.
Hana Bank also plans to introduce a dedicated unsecured loan product in December for lower-income employees. Applicants must earn no more than 35 million won annually and have worked at their current employer for at least one year. The maximum loan will be 15 million won, with a one-year grace period followed by repayment over five years.
Eligible borrowers, including single-parent families, households with multiple children, low-income customers and victims of financial fraud, will receive an interest-rate discount of 1 percentage point. Hana Financial Group said it had provided 3.1 trillion won in cumulative inclusive-finance support through the end of September, reaching 97% of its annual target of 3.2 trillion won.
NH NongHyup plans targeted support for farmers and low-income borrowers
NH NongHyup Financial Group has separately signed an agreement with the Korea Inclusive Finance Agency to join its microfinance program, committing a total of 100 billion won through contributions from affiliated companies. NongHyup Bank will provide 50 billion won, while NH Investment & Securities will contribute 40 billion won.
The group aims to establish a dedicated foundation in November, with specialized financial support planned for people returning to farming and young farmers. It expects to establish regional offices in major parts of South Korea next year and begin lending to people with low credit scores and limited incomes.
Financial institutions join campaign against illegal lending
The funding announcements coincided with renewed participation in the "Finance That Saves Lives" campaign, a public-private initiative launched in July by the Korea Inclusive Finance Agency. Financial institutions, government agencies and local governments take turns participating and nominating the next organization or executive.
The campaign seeks to prevent financially distressed people from being driven toward illegal private lenders, who operate outside the regulated financial system. Its central message is a promise to protect people from having to resort to such borrowing.
On Oct. 30, MG Credit Information CEO Park Jun-cheol joined the campaign after being nominated by Korea Investment Savings Bank CEO Jeon Chan-woo. Park nominated the heads of the Korea Federation of Community Credit Cooperatives and iM Financial Group as the next participants.
iM Bank CEO Kang Jung-hoon also joined after being nominated by Shinhan Bank CEO Jung Sang-hyuk. Kang said the bank would work to expand its inclusive-finance brand, "inter-Maum," while strengthening preventive measures, including the provision of government-backed financial products for lower-income borrowers.
South Korea strengthens its financial safety net
The Korea Inclusive Finance Agency was established in September 2016 under legislation supporting the financial lives of ordinary citizens. Overseen by the Financial Services Commission, it provides financial counseling and education, credit guarantees and loans, and supports programs including Workers' Sunshine Loan, Sunshine Loan 15, Sunshine Loan Youth and Microfinance. It also provides services for recovering dormant deposits.
The latest commitments come amid increased government attention to rising borrowing costs for lower-income households. At an Oct. 22 meeting, President Lee Jae Myung called for early measures to address increases in interest rates on loans for financially vulnerable people, describing the government as a last line of support for ordinary citizens.
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